Beyond the border: Understanding customs clearance charges

Imagine paying $1000 for a shipment, only to discover later that you owe an extra $300 just to get it cleared by customs. Surprises like these aren’t rare, especially when you are unfamiliar with customs clearance charges, how they work, and when customs charges apply.

In this article, we break down what these fees include, factors influencing them, how you can calculate them, and more.

What are customs clearance charges?

Customs clearance charges – also known as customs clearance fees or simply customs charges – are the sum of different costs levied on the import or export of goods during customs clearance. These charges cover documentation, inspection, duties, taxes, and administrative costs required to ensure compliance with regulations. The amount varies based on factors like the type of goods, their value, and the country’s regulations.

Types of customs clearance charges?

Customs clearance charges often encompass multiple fees, each serving a distinct purpose:

1. Import duties (or tariffs)
   Duties are ad valorem, which literally means “according to value” in Latin. Most commonly, they constitute a percentage of the shipment’s declared import value — including the cost of goods, shipping, and insurance. For example, if you are shipping goods from China to the US worth USD 10,000, and the duty rate is 5%, your customs duty would be USD 500. Notably, the duty rate (percentage of value) will vary depending on the merchandise, where it comes from, and whether there is any free trade agreement in place. Some goods may also attract specific customs duties based on weight or volume, such as a flat fee of $2 per kilogram for certain textiles. Others can have a compound duty rate, a combination of ad valorem and specific duties.

2. Taxes (VAT, GST, or Sales Tax)
   In many countries, Value-Added Tax (VAT) or Goods and Services Tax (GST) apply to imported items. This tax is calculated on the sum of the product value, freight, insurance, and customs duties. It can make the effective tax on imported products higher than the domestic sales tax.

3. Miscellaneous customs duties
   Excise duties are levied on specific categories of items like alcohol, tobacco, and luxury goods to regulate consumption or generate revenue from non-essential items. Anti-dumping duties are imposed to protect domestic industries from foreign goods priced below fair market value. Similarly, countervailing duties are applied to offset foreign government subsidies that give exporters an unfair advantage.

4. Customs brokerage or service fees
   If you hire a customs broker or your carrier acts as an intermediary, they typically charge a customs brokerage fee for handling clearance paperwork, liaising with authorities, and streamlining the import/export process. The fee may vary depending on the complexity of the clearance, volume, and required documentation.

5. Other ancillary charges
   They cover fees for processing customs documentation, administrative overheads, inspections and handling fees, port security charges, and any special compliance surcharges. Filing fees, security surcharges, bond fees, and scanning charges all fall under this umbrella. As an example, you can expect to pay a surcharge to have your customs broker produce an ECTN Certificate in the event that you are exporting goods to certain African countries where this document is mandatory.

Note: Some countries, like the United States, impose charges on imports in addition to the categories listed above. These may include government-mandated fees like the Merchandise Processing Fee (MPF) and the Harbor Maintenance Fee (HMF). While conceptually related to duties or taxes, these are often treated as separate line items in customs documentation.

When do customs charges apply?

Whenever goods cross international borders, and an import/export declaration is filed, these charges come into force. Here are some common scenarios when customs charges apply:

• Importing goods into a country from outside its trade union (e.g., importing goods from Asia into the European Union)
• Declaring goods from bonded warehouses or free zones and moving them into local circulation for the purpose of sale
• Exporting regulated items or high-value goods that require additional documentation

De Minimis & thresholds

In many countries, de minimis thresholds exempt low-value shipments from customs duties or taxes. For example, in the US, shipments under USD 800 often avoid duties altogether. In the EU, goods valued under EUR 150 may be free from customs duties, though VAT might still apply. Understanding these thresholds helps you determine when your shipment is likely to incur charges or qualify for an exemption.

Customs clearance charges: Import vs export

While the fundamental concept of ‘clearing customs’ applies to both import and export processes, the fee structures and regulations can differ.

• Import customs clearance fees: These typically include customs charges as imported goods enter a new market.
• Export customs clearance fees: Since goods are leaving the country, these fees often focus more on administrative costs and compliance checks.

Why are customs charges required?

• Revenue generation: Customs-related fees, duties, and taxes are a significant source of income for governments, funding infrastructure, healthcare, and public services.
• Protecting local industries: By imposing charges on imported goods, governments shield domestic industries from cheaper foreign competition.
• Regulating trade: Customs charges help enforce trade policies, balance trade deficits, and sometimes incentivise sustainable practices through tax breaks or penalties.

Impact of customs clearance fees on global trade

On a larger scale, these charges shape the flow of international commerce by influencing supply chains and pricing strategies.

High tariffs might deter companies from importing certain goods, steering them toward local alternatives. Conversely, reduced or zero-duty rates, often seen under free trade agreements (FTAs), encourage businesses to source products from specific countries. Understanding and managing customs charges is critical for anyone engaging in global trade, helping avoid unexpected costs and ensuring regulatory compliance.

Who pays customs clearance fees?

In most cases, the importer of record is responsible for paying costs for customs clearance.

Note that the timing and responsibility for payment depends on Incoterms® and the trade agreements between the buyer and seller.

• In typical scenarios, the charges are split. The shipper (seller or consignor) pays the export customs clearance fee (at the origin), and the receiver (buyer or consignee) pays the import customs clearance charges (at the destination).
• Buyers usually cover the customs clearance costs at the destination when using Incoterms®, such as Ex Works (EXW), Free on Board (FOB), and Cost, Insurance, and Freight (CIF).
• Delivered Duty Paid (DDP) is the only Incoterm® where the shipper (seller) handles both import and export customs clearances, including duties, taxes, and related fees.

It’s important to note that while Incoterms® define who pays for which segment of the journey, they do not cover every possible contingency, such as local taxes, additional security screenings, or specific customs processes unique to a region. They primarily specify which party bears the shipping costs and liabilities at each stage. It’s advisable to confirm any extra fees/taxes that may arise.

Tip: Are you confused about Incoterms, or do you usually make mistakes when using them? Here’s how to avoid the 7 most common Incoterms® mistakes.

How are customs fees determined?

Several variables affect charges for customs clearance costs, such as:

• Product classification: The Harmonized System, or HS code, is a standardised classification system for traded products and is used to calculate applicable duties. Even a slight difference in classification can change your duty rate significantly. So, make sure to identify your product’s HS code accurately to avoid paying the wrong amount.
• Country of origin and trade agreements: The origin of the goods can impact the duty rate, as some countries have trade agreements that reduce or eliminate certain tariffs. For example, goods covered under free trade agreements (like USMCA) might have lower or zero tariffs if they meet the requirements.
• Declared value and valuation methods: The declared customs value includes the product purchase price, freight costs, and insurance. The higher the value, the higher the duties. Understating or overstating the value can lead to penalties.
• Product type and industry: Different industries have varying duty structures. For example, raw materials, luxury items, or sensitive products like chemicals might attract higher duties due to their economic or security importance.
• Seasonal tariffs and quotas: Some products, especially agricultural goods, face time-bound tariffs or import quotas that shift depending on the time of year or country-specific policies. For example, the EU imposes seasonally differentiated tariffs on semi-tropical fruits (like strawberries) during local harvest months to support European growers.

How to calculate customs charges?

While each country has unique formulas, the general method typically follows these steps:

1. Gauge your shipment value: Include the cost of goods, insurance, freight costs, and other charges based on Incoterms®. This will form the baseline for further calculations.
2. Classify your freight: Identify the correct HS code for your product. It helps determine the base duty rate, either a percentage (ad valorem) or a fixed amount (specific).
3. Determine the customs value: Look up the product’s duty rate (ad valorem or specific) as per the destination country’s tariff schedule.
4. Apply the duty rate to the baseline: For instance, if your total shipment value is USD 10,000 and the ad valorem duty rate is 10%, your customs duty would be USD 1,000.
5. Add the applicable taxes: Depending on local regulations, VAT or GST might apply to the combined value, i.e. baseline shipment cost and calculated duties. Extending the previous example, the tax would be calculated for the combined value (USD 11,000).
6. Include other fees: Add costs like customs broker fees, handling costs, or miscellaneous surcharges to get the total customs clearance charges.

Notably, this calculation is a simplified version for calculating customs clearance charges. It can become more complex if anti-dumping, countervailing, or seasonal duties apply.

Given the complexity of certain shipments, especially those involving multiple commodities or origin rules, it’s often advisable to consult with a seasoned customs broker to avoid costly miscalculations. With Maersk GTCC (Global Trade and Customs Consulting), we offer a global network of customs experts and trade consultants, helping you navigate complex tariffs, customs duties and taxes, and local regulatory environments.